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The corporate affairs ministry is set to propose amendments to the Insolvency and Bankruptcy Code (IBC), based on recommendations made by a parliamentary panel, in the budget session of Parliament, according to a person familiar with the development.

The draft bill to amend IBC, which has to be first cleared by the Union cabinet, seeks to reduce the time between filing a bankruptcy petition and its admission in tribunals, speed up the approval of corporate rescue plans, and maximize the value of assets available for restructuring. The budget session of Parliament, currently on a break, will resume by mid-March and continue till the second week of April.

In case of a procedural delay in tabling the bill in the budget session, the government has the option of making the changes through an ordinance, without waiting for the Parliament’s monsoon session, the person cited above said seeking anonymity.

The bill also seeks to add a new chapter on cross-border bankruptcy resolution to the IBC, filling a major gap in the current regime.

“The effort (in framing the bill) has been to address most concerns raised by the Parliamentary standing committee in the best possible way. Making the law is one thing. Its implementation and development of the ecosystem are other issues. Vacancies in the National Company Law Tribunal benches are also being filled," the person said.

The proposed amendments seek to address the concerns raised by the parliamentary panel led by Lok Sabha MP Jayant Sinha in August. The panel expressed concern about the steep haircuts taken by lenders in some cases and delays beyond six months in stitching together resolution plans in many cases.

The bill also incorporates feedback from two rounds of public consultations. It seeks to empower bankruptcy resolution professionals hired by lenders to run distressed companies to review the past conduct of the distressed company and take corrective steps to protect the interests of stakeholders.

According to the proposal, past transactions starting from the bankruptcy filing date, rather than the admission of bankruptcy, will come under the company administrator’s review. The idea is to prevent a delay in the admission of a bankruptcy case from causing value erosion because significant pre-bankruptcy deals are out of the review ambit.

The current law allows resolution professionals to approach tribunals to annul a transaction of a bankrupt company dating back up to two years from the date of admission in the case of related-party transactions and up to one year in the case of others.

Queries emailed to a corporate affairs ministry spokesperson on Saturday for comments remained unanswered till the time of publishing.

“The application of the ‘look-back period’ from the date of filing the bankruptcy application increases the period under audit to identify preferential or undervalued transactions, and thus increases the scrutiny to identify any wilful default," said Divakar Vijayasarathy, founder and managing partner of consultant DVS Advisors LLP.

Experts also pointed out that ensuring quick admission of cases would go a long way in meeting the goals of IBC.

“The institutional framework for bankruptcy resolution must be efficient, and decisions have to be taken in a timely manner. The efforts to rescue companies in distress will fail if tribunals take a long time to admit cases," said Anoop Rawat, partner, insolvency and bankruptcy, Shardul Amarchand Mangaldas and Co., a law firm. In many instances, cases were admitted more than a year after the bankruptcy filing, said Rawat, adding that ensuring that the ecosystem has sufficient bench strength is also vital.

One of the proposals by the government panel that formed the basis of the proposed amendments was that the corporate rescue plan has to be cleared by the National Company Law Tribunal within 30 days. This, according to Vijayasarathy, would ensure faster resolution and makes it difficult for the promoters to carry out any preferred transaction.

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